NAB boss sorts out pay - up to $21.4m

Page Tools

New National Australia Bank chief executive John Stewart will have to hang around for at least the next 18 months to secure any incentive pay, but could earn as much as $21.4 million if he stays for three years.

And if his tenure doesn't work out but he completes the contract, Mr Stewart has the consolation that his package includes a one-way airline ticket back to London, courtesy of the bank.

Three months after he replaced Frank Cicutto in the top job, the Scottish-born Mr Stewart finally signed a three-year contract that investors hope will see him lead the bank out of its recent woes.

Mr Stewart's contract is broadly in line with those of his big-bank peers, and similar to that of his predecessor Mr Cicutto in most respects - including the terms and the structure of incentive payments - but is less generous.

Mr Cicutto could have earned as much as $30 million as a result of meeting all performance pay hurdles, whereas Mr Stewart's maximum three-year pay-off is $21.42 million. Shareholders will be glad to hear those performance hurdles include criteria related to "key result areas", including improved risk and control frameworks and cultural change, as well as share price performance versus other listed financial companies and top 50 companies.

AdvertisementAdvertisement

On an annual basis, Mr Stewart's maximum pay of $7.14 million would include $2.23 million in the form of a base salary, up to $1.115 million in a short-term cash incentive, the same in deferred shares and options, and performance rights comprising his long-term incentive worth $2.68 million.

The key differences from Mr Cicutto's contract are that NAB has abandoned a "consulting arrangement" which would have meant a hefty send-off, and Mr Stewart's termination payment is equal to 12 months fixed pay, compared with 18 months for his predecessor.

If Mr Stewart resigns within the first 18 months of the contract, all options and share rights will lapse, but after that they will be transferred to him on a pro-rata basis.

The contract signing represents a relief for investors concerned that the delay in signing might have pointed to some reluctance to take on the job, but Mr Stewart previously said he had simply not had time to sign the new deal.

Mr Stewart has said it will probably take two years to turn the bank around, without giving specifics of how he will achieve that goal. He has also indicated he is unlikely to hold the job for the long term.

NAB shares closed 20c higher at $29.58, having fallen from more than $30 when he was appointed. The base share price for his incentives will be taken from his time of appointment, not the most recent prices.

Mr Stewart has until now been paid based on a contract signed last year when he joined the bank as its European-based executive director and head of NAB Europe.

A NAB spokesman said the package was designed following the advice of remuneration consultants, John Egan & Associates. "That advice was provided and John Stewart accepted it without further negotiation."

Mr Stewart's next aim is to fill many holes in his management team, including the important position of chief financial officer, given the purge of senior positions following January's $360 million rogue trading scandal.